HomeStreet, Inc. - FORM 8-K - EX-99.1 - EARNINGS RELEASE ISSUED BY HOMESTREET, INC. DATED OCTOBER 26, 2015

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8-K - FORM 8-K - HomeStreet, Inc.	form8-k3q2015earningsrelea.htm
EX-99.2 - SUMMARY EARNINGS RELEASE ISSUED BY HOMESTREET, INC. DATED OCTOBER 26, 2015 - HomeStreet, Inc.	summaryearningsrelease3q20.htm

HomeStreet, Inc. Reports Third Quarter 2015 Results

Net Income of $10.0 Million, or $0.45 per Diluted Share

SEATTLE – October 26, 2015 – (BUSINESS WIRE) – HomeStreet, Inc. (NASDAQ:HMST) (the “Company” or “HomeStreet”), the parent company of HomeStreet Bank, today announced net income of $10.0 million, or $0.45 per diluted share, for the third quarter of 2015, compared to net income of $12.4 million, or $0.56 per diluted share, for the second quarter of 2015 and $5.0 million, or $0.33 per diluted share, for the third quarter of 2014. Core net income (a non-GAAP financial measure that adjusts net income to exclude merger-related items) for the quarter was $9.4 million, or $0.42 per diluted share, compared to core net income of $14.5 million, or $0.65per diluted share, for the second quarter of 2015 and $5.4 million, or $0.36 per diluted share, for the third quarter of 2014.

Merger Activities

On September 28, 2015, the Company entered into a definitive agreement to acquire Orange County Business Bank ("OCBB"), a California banking corporation in Irvine, California. The proposed transaction was approved by the boards of both companies and is expected to close in the first quarter of 2016, subject to certain conditions set forth in the merger agreement as well as customary closing conditions, including OCBB shareholder approval and certain state and federal regulatory approvals.

On August 4, 2015, the Company entered into a definitive agreement to acquire a bank branch and deposits in Dayton, Washington. This acquisition, which has received regulatory approval and is expected to close in December, will increase HomeStreet’s network of branches in Eastern Washington to a total of five retail deposit branches.

During the first quarter of 2015, the Company completed its merger with Simplicity Bancorp, Inc. and Simplicity Bank ("Simplicity") located in Southern California, which resulted in the expansion of HomeStreet’s retail branch banking network into California. Simplicity's results of operations have been included in the consolidated results of operations since the date of the merger on March 1, 2015. The second quarter of 2015 was the first full quarter of combined operations.

Consolidated results:


▪	Net interest income was $39.6 million in the third quarter of 2015 compared with $38.2 million in the second quarter of 2015 and $25.3 million in the third quarter of 2014.


▪	Net interest margin was 3.67% compared to 3.63% in the second quarter of 2015 and 3.50% in the third quarter of 2014.


▪	Average interest-earning assets of $4.39 billion increased $128.2 million, or 3.0% from $4.27 billion in second quarter of 2015 and increased $1.44 billion or 48.8% from $2.95 billion in third quarter of 2014.


▪	Net gain on mortgage loan origination and sale activities was $57.9 million in the third quarter of 2015 compared with $70.0 million in the second quarter of 2015 and $37.6 million in the third quarter of 2014.


▪	Return on average shareholders' equity for the quarter and year-to-date was 8.65% and 10.14%, respectively. Excluding after-tax merger-related items, return on average shareholders' equity was 8.21%and 11.05%, respectively.

Segment results:


◦	Commercial and Consumer Banking


▪	Excluding after-tax merger-related items, the Commercial and Consumer Banking segment recorded net income of $6.3 millionfor the current quarter compared to net income of $5.0 millionfor the second quarter of 2015 and $4.0 million for the third quarter of 2014. Loans held for investment of $3.01 billion increased $112.3 million, or 3.9%, from June 30, 2015.


▪	We opened two de novo retail deposit branches in the greater Seattle area during the quarter.

◦Mortgage Banking


▪	Mortgage Banking segment net income was $3.2 million for the third quarter compared to net income of $9.5 million for the second quarter of 2015 and net income of $1.4 million for the third quarter of 2014.


▪	Single family mortgage closed loan volume was $1.93 billion, down 4.4% from the second quarter of 2015 and up 49.4% from the third quarter of 2014.


▪	Single family mortgage interest rate lock commitments were $1.81 billion, down 4.0%, from the second quarter of 2015 and up 54.7%, from the third quarter of 2014.


▪	The portfolio of single family loans serviced for others increased to $14.27 billion at September 30, 2015, up 9.9% from June 30, 2015 and up 34.7% from September 30, 2014.


▪	In the third quarter, HomeStreet was the number one originator by volume of purchase mortgages in the Puget Sound region, based on the combined originations of HomeStreet and loans originated through an affiliated business arrangement known as WMS Series LLC.

“We are pleased with our progress in third quarter as we continue to execute our strategy to grow and diversify earnings,” said Mark K. Mason, Chairman and Chief Executive Officer. “In the quarter, we expanded our commercial and consumer banking business organically by opening two de novo bank branches in Greater Seattle, and we announced that we entered into definitive agreements to acquire Orange County Business Bank located in Irvine, California, which will add to our growing platform in Southern California, and to acquire a bank branch in Dayton, Washington, which will increase our network of branches in Eastern Washington. After closing a record volume of $2.02 billion in single family mortgages in second quarter, we continued our strong production with $1.93 billion in single family closed loan volume in third quarter. Overall, lower profit margins on mortgage originations reduced our results for the quarter; however, excluding after-tax merger-related items, our Commercial and Consumer Banking segment net income of $6.3 million for the third quarter compared to net income of $5.0 million for the second quarter of 2015 reflects substantial progress toward our strategic objectives.”

Consolidated Results of Operations

Net Interest Income

Net interest income in the third quarter of 2015 was $39.6 million, up $1.4 million, or 3.7%, from the second quarter of 2015 and up $14.3 million, or 56.6%, from the third quarter of 2014 primarily as a result of growth in average interest-earning assets. In the third quarter of 2015, our net interest margin, on a tax equivalent basis, was 3.67% compared to 3.63% in the second quarter of 2015 and 3.50% in the third quarter of 2014.

Total average interest-earning assets in the third quarter of 2015 increased $128.2 million, or 3.0%, from the second quarter of 2015 primarily due to a 4.0% increase in average balances of loans held for investment. Total average interest-earning assets and interest-bearing liabilities increased 48.8% from the third quarter of 2014 primarily due to overall growth in the Company, both organically and through the Simplicity merger.

Noninterest Income

Noninterest income in the third quarter of 2015 was $67.5 million, down $5.5 million, or 7.6%, from $73.0 million in the second quarter of 2015 and up $21.7 million, or 47.3%, from $45.8 million in the third quarter of 2014. The variances in noninterest income compared with the prior periods were primarily due to net gain on mortgage origination and sale activities. Net gain on mortgage origination and sale activities decreased $12.1 million from the prior quarter and increased $20.2 million from the third quarter of 2014.

Noninterest Expense

Noninterest expense for the third quarter of 2015 was $92.0 million compared with $92.3 million for the second quarter of 2015 and $64.2 million for the third quarter of 2014. Included in noninterest expense for these periods were merger-related expenses of $437 thousand for the third quarter of 2015, $3.2 million for the second quarter of 2015 and $722 thousand for the third quarter of 2014. Excluding merger-related expenses, noninterest expense for the third quarter of 2015 was $91.6 million compared with $89.1 millionfor the second quarter of 2015 and $63.4 million for the third quarter of 2014. The increase of $2.5 million, or 2.8%, from the second quarter of 2015 was primarily due to increased salaries and related costs due to higher headcount. The increase of $28.2 million, or 44.4%, from the third quarter of 2014 was primarily due to increased salary and related costs and other expenses related to growth in the business and higher commissions as a result of a 49.4% increase in single family mortgage closed loan volume.

As of September 30, 2015, we had 2,100 full-time equivalent employees, a 6.9% increase from 1,964 employees as of June 30, 2015, and a 31.4% increase from 1,598 employees as of September 30, 2014. During the 12-month period ending September 30, 2015, the Company added nine home loan centers and 10 retail deposit branches to bring our total home loan centers to 64 and our total retail deposit branches to 43.

Income Taxes

For the third quarter of 2015 we recorded income tax provision of $4.4 million, compared to a provision of $6.0 million for the second quarter of 2015, and $2.0 million for the third quarter of 2014.

For the first nine months of 2015, income tax provision was $13.7 million with an effective tax rate of 29.6% (inclusive of discrete items), compared to $7.0 million and a 29.6% effective tax rate (inclusive of discrete items) for the same period in 2014.

Our effective income tax rate for the nine months ended September 30, 2015 differs from the Federal statutory tax rate of 35% primarily due to the impact of state income taxes, the benefit of tax exempt interest income, the benefit of low income housing tax credit investments, the tax impacts related to the Simplicity transaction, and the impacts of our 2014 tax return true-up adjustments. The Company’s discrete amounts for the nine months ended September 30, 2015 resulted in a net reduction of approximately 4.3% to the effective tax rate, largely due to the Simplicity acquisition. For tax purposes, the bargain purchase gain from the Simplicity acquisition is nontaxable and resulted in a discrete reduction of 5.6% to the effective tax rate as of September 30, 2015. Additionally, re-evaluation of the estimated 2015 state tax rate as a result of the Company's increased business activities in California resulted in a discrete increase of 2.4% to the effective tax rate as of September 30, 2015.

Business Segments

Commercial and Consumer Banking Segment

Commercial and Consumer Banking segment net income was $6.8 million in the third quarter of 2015 compared to $2.9 million in the second quarter of 2015. Excluding after-tax merger-related items, net income was $6.3 million in the third quarter of 2015, compared to net income of $5.0 million in the second quarter of 2015 primarily due to higher net interest income on higher average balances of loans during the third quarter and gain on sale of investment securities. We recorded a $700 thousand provision for credit losses in the third quarter of 2015 compared to a provision of $500 thousand in the second quarter of 2015.

During the third quarter of 2015, Commercial and Consumer Banking segment net income, excluding after-tax merger-related items, increased $2.3 million, or 57.1%, from $4.0 million in the third quarter of 2014, primarily due to an $11.3 million increase in net interest income resulting from higher average balances of interest-earning assets, partially offset by a $9.2 million increase in noninterest expense. These increases were the combined result of the Simplicity merger and organic growth.

Loans Held for Investment

Loans held for investment, net, were $3.01 billion at September 30, 2015, an increase of $112.3 million, or 3.9%, from June 30, 2015 and an increase of $913.8 million, or 43.5%, from December 31, 2014. A significant portion of this growth is related to $664.1 million of loans added to the portfolio from the Simplicity merger during the first quarter of 2015. New loan commitments in the third quarter of 2015 totaled $416.6 million and originations totaled $272.7 million. During the quarter, we added loan commitments that included $100.4 million of consumer loans, $99.5 million of commercial real estate and multifamily loans, $190.0 million of construction and land development loans and $26.7 million of commercial business loans.

Asset Quality

Nonperforming assets were $27.7 million, or 0.56% of total assets at September 30, 2015, compared to $32.7 million, or 0.67% of total assets at June 30, 2015. Nonaccrual loans were $19.5 million, or 0.64% of total loans at September 30, 2015, compared to $21.3 million, or 0.73% of total loans at June 30, 2015. Other real estate owned ("OREO") balances were $8.3 million at September 30, 2015, a decrease of $3.2 million, or 27.6%, from $11.4 million at June 30, 2015. Delinquent loans of $72.9 million, or 2.40% of total loans at September 30, 2015, increased from $65.8 million, or 2.24% of total loans at June 30, 2015. Excluding Federal Housing Administration ("FHA")-insured and Department of Veterans' Affairs ("VA")-guaranteed single family mortgage loans, delinquent loans were $30.6 million, or 1.04% of total non-FHA/VA loans at September 30, 2015, compared to $26.0 million, or 0.92% of total non-FHA/VA loans at June 30, 2015.

The allowance for loan losses was $26.9 million at September 30, 2015 compared to $25.8 million at June 30, 2015. The allowance for loan losses as a percentage of loans held for investment was 0.89% at September 30, 2015 compared to 0.88% at June 30, 2015. Excluding acquired loans, the allowance for loan losses as a percentage of total loans was 1.14% at September 30, 2015, compared to 1.16% at June 30, 2015. Net recoveries in the third quarter of 2015 totaled $739 thousand, compared to net recoveries of $320 thousand in the second quarter of 2015 and net charge-offs of $57 thousand in the third quarter of 2014.

Deposits

Deposit balances were $3.31 billion at September 30, 2015 compared to $3.32 billion at June 30, 2015 and $2.43 billion at September 30, 2014. The change from the prior year includes $651.2 million of deposits added from the Simplicity merger during the first quarter of 2015.

Noninterest Expense

Commercial and Consumer Banking segment noninterest expense of $28.1 million decreased $1.2 million, or 4.0%, from the second quarter of 2015. Included in noninterest expense for the third quarter and second quarter of 2015 were merger-related expenses of $437 thousand and $3.2 million, respectively. Excluding the merger-related expenses in both periods, noninterest expense increased primarily due to the continued growth of our commercial real estate and commercial business lending units and the expansion of our branch banking network. During the first quarter of 2015, we launched HomeStreet Commercial Capital, a commercial real estate lending group based in Orange County, California providing permanent financing for a range of commercial real estate loans including multifamily, industrial, retail, office, mobile home parks and self-storage facilities. We also added a team specializing in U.S. Small Business Administration ("SBA") lending also located in Orange County, California. Additionally, we opened two de novo retail deposit branches in the Seattle area during the third quarter of 2015 and one de novo retail deposit branch in the Seattle area during the second quarter of 2015.

Mortgage Banking Segment

Net income for the Mortgage Banking segment was $3.2 million in the third quarter of 2015, compared to net income of $9.5 million in the second quarter of 2015 and net income of $1.4 million in the third quarter of 2014. The $6.4 million decrease in net income from the second quarter of 2015 was primarily due to lower net gain on single family mortgage loan origination and sale activities due to lower servicing origination values and lower secondary market gains. The $1.7 million increase in net income from the third quarter of 2014 was primarily due to higher net gain on single family mortgage loan origination and sale activities due to higher interest rate lock commitments and composite margin, partially offset by higher commission expense resulting from increased closed loan volume in the quarter.

Mortgage Origination for Sale

Single family mortgage interest rate lock commitments, net of estimated fallout, totaled $1.81 billion in the third quarter of 2015, a decrease of $76.2 million, or 4.0%, from $1.88 billion in the second quarter of 2015 and up $639.1 million, or 54.7%, from $1.17 billion in the third quarter of 2014. The increase from the third quarter of 2014 was primarily the result of increased single family purchase mortgage activity due to continued low mortgage interest rates and the continued expansion of our mortgage production staff, support staff and offices into new markets.

Single family closed loan volume designated for sale was $1.93 billion in the third quarter of 2015, down $88.5 million, or 4.4%, from $2.02 billion in the second quarter of 2015 and up $639.3 million, or 49.4%, from $1.29 billion in the third quarter of 2014. At September 30, 2015, the combined pipeline of interest rate lock commitments, net of estimated fallout, and mortgage loans held for sale was $1.45 billion, compared to $1.65 billion at June 30, 2015 and $974.0 million at September 30, 2014.

Net gain on single family mortgage loan origination and sale activities in the third quarter of 2015 was $56.0 million compared to $67.5 million in the second quarter of 2015 and $36.8 million in the third quarter of 2014.

Due to differences in the timing of revenue recognition between components of the gain on loan origination and sale activities, the Company analyzes the profitability of these activities using a "Composite Margin," which is comprised of the ratios of the components to their respective populations of interest rate lock commitments and closed loans. The Composite Margin for the third quarter of 2015 was 311 basis points, compared with 347 basis points in the second quarter of 2015 and 316 basis points in the third quarter of 2014.

Mortgage Servicing

Single family mortgage servicing income of $4.1 million in the third quarter of 2015 increased $2.9 million, or 249.7%, from $1.2 million in the second quarter of 2015 and decreased $1.2 million, or 22.5%, from $5.3 million in the third quarter of 2014. The increase compared to the second quarter of 2015 was primarily the result of an increase in servicing fees collected combined with improved risk management results. The decrease compared to the third quarter of 2014 resulted primarily from lower risk management results.

Single family mortgage servicing fees collected in the third quarter of 2015 increased $1.0 million, or 11.6%, from the second quarter of 2015 and increased $1.9 million, or 23.5%, from the third quarter of 2014. The increases were primarily due to higher average balances in our loans serviced for others portfolio. The portfolio of single family loans serviced for others was $14.27 billion at September 30, 2015 compared to $12.98 billion at June 30, 2015 and $10.59 billion at September 30, 2014.

Noninterest Expense

Mortgage Banking segment noninterest expense of $63.9 million increased $861 thousand, or 1.4%, from the second quarter of 2015 resulting from our organic growth and expansion into new markets.

Capital

On January 1, 2015, the Bank and the Company became subject to Basel III capital standards. The Bank and the Company remain above current “well-capitalized” regulatory minimums. At September 30, 2015, regulatory capital ratios for the Bank and the Company were as follows:



At September 30, 2015*	Bank		Company		For Minimum Capital Adequacy Purposes		To Be Categorized As “Well Capitalized” Under Prompt Corrective Action Provisions

Tier 1 leverage capital (to average assets)	9.69	%	10.00	%	4.0	%	5.0	%
Common equity risk-based capital (to risk-weighted assets)	13.35	%	10.65	%	4.5	%	6.5	%
Tier 1 risk-based capital (to risk-weighted assets)	13.35	%	12.09	%	6.0	%	8.0	%
Total risk-based capital (to risk-weighted assets)	14.15	%	12.79	%	8.0	%	10.0	%

*Regulatory capital ratios at September 30, 2015 are preliminary.

Conference Call

HomeStreet, Inc., the parent company of HomeStreet Bank, will conduct a quarterly earnings conference call on Tuesday, October 27, 2015 at 1:00 p.m. EDT. Mark Mason, CEO, and Melba Bartels, CFO, will discuss third quarter 2015 results and provide an update on recent activities. A question and answer session will follow the presentation. Shareholders, analysts and other interested parties may register in advance at http://dpregister.com/10073378 or may join the call by dialing 1-877-508-9589 (1-855-669-9657 in Canada) shortly before 1:00 p.m. EDT. A rebroadcast will be available approximately one hour after the conference call by dialing 1-877-344-7529 and entering passcode 10073378.

The information to be discussed in the conference call will be available on the company's web site after the market closes on Monday, October 26, 2015.

About HomeStreet

HomeStreet, Inc. (NASDAQ:HMST) is a diversified financial services company headquartered in Seattle, Washington, serving consumers and businesses in the Western United States and Hawaii through its various operating subsidiaries. The company operates two primary business segments: Mortgage Banking, which originates and purchases single family residential mortgage loans, primarily for sale into the secondary markets; and Commercial & Consumer Banking, including commercial real estate, commercial lending, residential construction lending, retail banking, private banking, investment and insurance services. Its principal subsidiaries are HomeStreet Bank and HomeStreet Capital Corporation. Certain information about our business can be found on our investor relations web site, located at http://ir.homestreet.com.

Forward-Looking Statements

This press release contains forward-looking statements concerning HomeStreet, Inc. and HomeStreet Bank and their operations, performance, financial conditions and likelihood of success. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are based on many beliefs, assumptions, estimates and expectations of our future performance, taking into account information currently available to us, and include statements about the competitiveness of the banking industry. When used in this press release, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” and similar expressions (including the negative of these terms) may help identify forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. Forward-looking statements speak only as of the date made, and we do not undertake to update them to reflect changes or events that occur after that date.

We caution readers that a number of factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Among other things, we face limitations and risks associated with our ability to expand our banking operations geographically and across market sectors, integrate our recent acquisitions, grow our franchise and capitalize on market opportunities, meet the growth targets that management has set for the Company, maintain our position in the industry and generate positive net income and cash flow. These limitations and risks include without limitation changes in general economic conditions that impact our markets and our business, actions by the Federal Reserve affecting monetary and fiscal policy, regulatory and legislative actions that may increase capital requirements or otherwise constrain our ability to do business, our ability to maintain electronic and physical security of our customer data and our information systems, our ability to maintain compliance with applicable laws and regulations, our ability to attract and retain key personnel, our ability to make accurate estimates of the value of our non-cash assets and liabilities, significant increases in the competition we face in our industry and market and the extent of our success in problem asset resolution efforts. Closing of the acquisitions discussed in this press release will be contingent on meeting certain conditions, including the receipt of regulatory approvals, shareholder approvals from the shareholders of OCBB in that acquisition and closing a merger between AmericanWest Bank and Banner Bank in relation to the proposed Dayton branch acquisition. Such transactions may be delayed in closing, may require significant management attention, and may fall short of anticipated size and value. We may not realize the benefits expected from our anticipated acquisitions or our recently completed bank and branch acquisitions in the anticipated time frame (or at all), and integration of acquired operations may take longer or prove more expensive than anticipated. In addition, we may not recognize all or a substantial portion of the value of our rate-lock loan activity due to challenges our customers may face in meeting current underwriting standards, a decrease in interest rates, an increase in competition for such loans, unfavorable changes in general economic conditions, including housing prices, the job market, consumer confidence and spending habits either nationally or in the regional and local market areas in which the Company does business, and recent and future legislative or regulatory actions or reform that affect our business or the banking or mortgage industries more generally. A discussion of the factors that we recognize to pose risk to the achievement of our business goals and our operational and financial objectives is contained in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. These factors are updated from time to time in our filings with the Securities and Exchange Commission, and readers of this release are cautioned to review those disclosures in conjunction with the discussions herein.

Information contained herein, other than information at December 31, 2014 and for the twelve months then ended, is unaudited. All financial data should be read in conjunction with the notes to the consolidated financial statements of HomeStreet, Inc., and subsidiaries as of and for the fiscal year ended December 31, 2014, as contained in the Company's Annual Report on Form 10-K for such fiscal year.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we have disclosed “core net income” to provide comparisons of quarters and year-to-date fiscal 2015 net income to the corresponding periods of fiscal 2014. We believe this information is useful to investors who are seeking to exclude the after-tax impact of merger-related expenses and a bargain purchase gain, both of which we recorded in connection with our merger with Simplicity Bancorp on March 1, 2015. We also have presented adjusted expenses, which eliminate costs incurred in connection with the merger. Similarly, we have provided information about our balance sheet items, including total loans, total deposits and total assets, adjusted in each case to eliminate merger-related impacts. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain merger-related revenues and expenses that may not be indicative of our recurring core business operating results. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance, as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are available to institutional investors and analysts to help them assess the strength of our business.

For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures," included at the end of this release.

Source: HomeStreet, Inc.



Contact:		Investor Relations:
		HomeStreet, Inc.
		Mark Hettel (206) 389-6303
		Mark.Hettel@HomeStreet.com
		http://ir.homestreet.com

HomeStreet, Inc. and Subsidiaries

Summary Financial Data



	Quarter Ended										Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014		Sept. 30, 2015		Sept. 30, 2014

Income statement data (for the period ended):
Net interest income	$	39,634	$	38,230	$	30,734	$	27,502	$	25,308	$	108,598	$	71,167
Provision (reversal of provision) for credit losses	700		500		3,000		500		—		4,200		(1,500		)
Noninterest income	67,468		72,987		75,373		51,487		45,813		215,828		134,170
Noninterest expense	92,026		92,335		89,482		68,791		64,158		273,843		183,220
Merger-related expenses (included in noninterest expense)	437		3,208		12,165		889		722		15,810		2,166
Net income before taxes	14,376		18,382		13,625		9,698		6,963		46,383		23,617
Income tax expense	4,415		6,006		3,321		4,077		1,988		13,742		6,979
Net income	$	9,961	$	12,376	$	10,304	$	5,621	$	4,975	$	32,641	$	16,638
Basic earnings per common share	$	0.45	$	0.56	$	0.60	$	0.38	$	0.34	$	1.60	$	1.12
Diluted earnings per common share	$	0.45	$	0.56	$	0.59	$	0.38	$	0.33	$	1.58	$	1.11
Common shares outstanding	22,061,702		22,065,249		22,038,748		14,856,611		14,852,971		22,061,702		14,852,971
Weighted average common shares
Basic	22,035,317		22,028,539		17,158,303		14,811,699		14,805,780		20,407,386		14,797,019
Diluted	22,291,810		22,292,734		17,355,076		14,973,222		14,968,238		20,646,540		14,957,034
Dividends per share	$	—	$	—	$	—	$	—	$	—	$	—	$	0.11
Book value per share	$	20.87	$	20.29	$	19.94	$	20.34	$	19.83	$	20.87	$	19.83
Tangible book value per share ⁽¹⁾	$	19.95	$	19.35	$	18.97	$	19.39	$	18.86	$	19.95	$	18.86

Financial position (at period end):
Cash and cash equivalents	$	37,303	$	46,197	$	56,864	$	30,502	$	34,687	$	37,303	$	34,687
Investment securities	602,018		509,545		476,102		455,332		449,948		602,018		449,948
Loans held for sale	882,319		972,183		865,322		621,235		698,111		882,319		698,111
Loans held for investment, net	3,012,943		2,900,675		2,828,177		2,099,129		1,964,762		3,012,943		1,964,762
Mortgage servicing rights	146,080		153,237		121,722		123,324		124,593		146,080		124,593
Other real estate owned	8,273		11,428		11,589		9,448		10,478		8,273		10,478
Total assets	4,975,653		4,866,248		4,604,403		3,535,090		3,474,656		4,975,653		3,474,656
Deposits	3,307,693		3,322,653		3,344,223		2,445,430		2,425,458		3,307,693		2,425,458
FHLB advances	1,025,745		922,832		669,419		597,590		598,590		1,025,745		598,590
Federal funds purchased and securities sold under agreements to repurchase	—		—		9,450		50,000		14,225		—		14,225
Shareholders’ equity	460,458		447,726		439,395		302,238		294,568		460,458		294,568

Financial position (averages):
Investment securities	$	539,330	$	506,904	$	462,762	$	454,127	$	457,545	$	503,280	$	460,723
Loans held for investment	2,975,624		2,861,223		2,370,763		2,044,873		1,917,503		2,738,085		1,838,526
Total interest-earning assets	4,394,557		4,266,382		3,473,652		3,140,708		2,952,916		4,048,237		2,777,988
Total interest-bearing deposits	2,573,512		2,626,925		2,205,585		1,892,399		1,861,164		2,470,022		1,880,664
FHLB advances	887,711		783,801		515,958		606,753		442,409		730,519		372,605
Federal funds purchased and securities sold under agreements to repurchase	—		4,336		41,734		23,338		11,149		15,204		4,134
Total interest-bearing liabilities	3,523,080		3,476,919		2,825,134		2,584,347		2,376,579		3,277,602		2,319,872
Shareholders’ equity	460,489		455,721		370,008		305,068		295,229		429,071		284,146

HomeStreet, Inc. and Subsidiaries

Summary Financial Data (continued)



	Quarter Ended																	Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2015				Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014			Sept. 30, 2014			Sept. 30, 2015				Sept. 30, 2014

Financial performance:
Return on average shareholders’ equity ⁽²⁾	8.65		%		10.86		%	11.14		%		7.37		%	6.74		%	10.14		%		7.81		%
Return on average tangible shareholders' equity⁽¹⁾	9.06		%		11.39		%	11.67		%		7.73		%	7.09		%	10.63		%		8.22		%
Return on average assets	0.83		%		1.06		%	1.08		%		0.65		%	0.61		%	0.98		%		0.71		%
Net interest margin ⁽³⁾	3.67		%		3.63		%	3.60		%		3.53		%	3.50		%	3.63		%		3.50		%
Efficiency ratio ⁽⁴⁾	85.92		%		83.02		%	84.33		%		87.09		%	90.21		%	84.41		%		89.23		%
Asset quality:
Allowance for credit losses	$	27,887			$	26,448		$	25,628			$	22,524		$	22,111		$	27,887			$	22,111
Allowance for loan losses/total loans⁽⁵⁾	0.89		%		0.88		%	0.87		%		1.04		%	1.10		%	0.89		%		1.10		%
Allowance for loan losses/nonaccrual loans	138.27		%		120.97		%	117.48		%		137.51		%	109.75		%	138.27		%		109.75		%
Total nonaccrual loans⁽⁶⁾⁽⁷⁾	$	19,470			$	21,308		$	21,209			$	16,014		$	19,906		$	19,470			$	19,906
Nonaccrual loans/total loans	0.64		%		0.73		%	0.74		%		0.75		%	1.00		%	0.64		%		1.00		%
Other real estate owned	$	8,273			$	11,428		$	11,589			$	9,448		$	10,478		$	8,273			$	10,478
Total nonperforming assets⁽⁷⁾	$	27,743			$	32,736		$	32,798			$	25,462		$	30,384		$	27,743			$	30,384
Nonperforming assets/total assets	0.56		%		0.67		%	0.71		%		0.72		%	0.87		%	0.56		%		0.87		%
Net (recoveries) charge-offs	$	(739	)		$	(320	)	$	(104	)		$	87		$	57		$	(1,163	)		$	478
Regulatory capital ratios for the Bank:
Basel III - Tier 1 leverage capital (to average assets)	9.69		%	⁽⁸⁾	9.46		%	11.47		%	⁽⁹⁾	NA			NA			9.69		%	⁽⁸⁾	NA
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets)	13.35		%	⁽⁸⁾	13.17		%	13.75		%		NA			NA			13.35		%	⁽⁸⁾	NA
Basel III - Tier 1 risk-based capital (to risk-weighted assets)	13.35		%	⁽⁸⁾	13.17		%	13.75		%		NA			NA			13.35		%	⁽⁸⁾	NA
Basel III - Total risk-based capital (to risk-weighted assets)	14.15		%	⁽⁸⁾	13.97		%	14.57		%		NA			NA			14.15		%	⁽⁸⁾	NA
Basel I - Tier 1 leverage capital (to average assets)	NA				NA			NA				9.38		%	9.63		%	NA				9.63		%
Basel I - Tier 1 risk-based capital (to risk-weighted assets)	NA				NA			NA				13.10		%	13.03		%	NA				13.03		%
Basel I - Total risk-based capital (to risk-weighted assets)	NA				NA			NA				14.03		%	13.96		%	NA				13.96		%
Regulatory capital ratios for the Company:
Basel III - Tier 1 leverage capital (to average assets)	10.00		%	⁽⁸⁾	9.87		%	11.95		%	⁽⁹⁾	NA			NA			10.00		%		NA
Basel III - Tier 1 common equity risk-based capital (to risk-weighted assets)	10.65		%	⁽⁸⁾	10.66		%	11.12		%		NA			NA			10.65		%		NA
Basel III - Tier 1 risk-based capital (to risk-weighted assets)	12.09		%	⁽⁸⁾	12.02		%	12.55		%		NA			NA			12.09		%		NA
Basel III - Total risk-based capital (to risk-weighted assets)	12.79		%	⁽⁸⁾	12.72		%	13.26		%		NA			NA			12.79		%		NA
Other data:
Full-time equivalent employees (ending)	2,100				1,964			1,829				1,611			1,598			2,100				1,598


(1)	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For additional information on these ratios and for corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures in this earnings release.


(2)	Net earnings available to common shareholders (annualized) divided by average shareholders’ equity.


(3)	Net interest income divided by total average interest-earning assets on a tax equivalent basis.


(4)	Noninterest expense divided by total net revenue (net interest income and noninterest income).


(5)	Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.14%, 1.16%, 1.19%, 1.10% and 1.18% at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.


(6)	Generally, loans are placed on nonaccrual status when they are 90 or more days past due.


(7)	Includes $1.5 million, $1.2 million, $1.4 million, $4.4 million and $6.3 million of nonperforming loans guaranteed by the SBA at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.


(8)	Regulatory capital ratios at September 30, 2015 are preliminary. On January 1, 2015, the Company and the Bank became subject to Basel III capital standards. Regulatory capital ratios under Basel I may not be comparative.


(9)	March 31, 2015 Tier 1 leverage capital (to average assets) includes average assets from the Simplicity merger for one month. If the Simplicity merger had occurred on January 1, 2015, the Bank's Tier 1 leverage capital would have been 9.95% and the Company's Tier 1 leverage capital would have been 10.38% at March 31, 2015.

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Operations



	Three Months Ended September 30,					%		Nine Months Ended September 30,						%
(in thousands, except share data)	2015		2014			Change		2015			2014			Change
Interest income:
Loans	$	41,012	$	25,763		59	%	$	111,603		$	71,865		55	%
Investment securities	2,754		2,565			7		8,426			8,199			3
Other	224		150			49		647			449			44
	43,990		28,478			54		120,676			80,513			50
Interest expense:
Deposits	3,069		2,364			30		8,656			7,080			22
Federal Home Loan Bank advances	958		509			88		2,476			1,366			81
Federal funds purchased and securities sold under agreements to repurchase	—		6			(100	)	8			7			14
Long-term debt	278		271			3		815			851			(4	)
Other	51		20			155		123			42			193
	4,356		3,170			37		12,078			9,346			29
Net interest income	39,634		25,308			57		108,598			71,167			53
Provision (reversal of provision) for credit losses	700		—			NM		4,200			(1,500		)	NM
Net interest income after provision for credit losses	38,934		25,308			54		104,398			72,667			44
Noninterest income:
Net gain on mortgage loan origination and sale activities	57,885		37,642			54		189,746			104,946			81
Mortgage servicing income	4,768		6,155			(23	)	10,896			24,284			(55	)
Income (loss) from WMS Series LLC	380		(122		)	NM		1,428			(69		)	NM
Gain (loss) on debt extinguishment	—		2			NM		—			(573		)	NM
Depositor and other retail banking fees	1,701		944			80		4,239			2,676			58
Insurance agency commissions	477		256			86		1,183			892			33
Gain on sale of investment securities available for sale	1,002		480			109		1,002			1,173			(15	)
Bargain purchase gain (adjustment)	796		—			NM		7,345			—			NM
Other	459		456			1		(11		)	841			(101	)
	67,468		45,813			47		215,828			134,170			61
Noninterest expense:
Salaries and related costs	60,991		42,604			43		180,238			118,681			52
General and administrative	14,869		10,326			44		42,532			31,593			35
Legal	868		630			38		1,912			1,571			22
Consulting	166		628			(74	)	6,544			2,182			200
Federal Deposit Insurance Corporation assessments	504		682			(26	)	1,890			1,874			1
Occupancy	6,077		4,935			23		18,024			14,042			28
Information services	8,159		4,220			93		21,993			13,597			62
Net cost (income) from operation and sale of other real estate owned	392		133			195		710			(320		)	NM
	92,026		64,158			43		273,843			183,220			49
Income before income taxes	14,376		6,963			106		46,383			23,617			96
Income tax expense	4,415		1,988			122		13,742			6,979			97
NET INCOME	$	9,961	$	4,975		100		$	32,641		$	16,638		96

Basic income per share	$	0.45	$	0.34		32		$	1.60		$	1.12		43
Diluted income per share	$	0.45	$	0.33		36		$	1.58		$	1.11		42
Basic weighted average number of shares outstanding	22,035,317		14,805,780			49		20,407,386			14,797,019			38
Diluted weighted average number of shares outstanding	22,291,810		14,968,238			49		20,646,540			14,957,034			38

NM = not meaningful

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Operation



	Quarter Ended
(in thousands, except share data)	Sept. 30, 2015		Jun. 30, 2015			Mar. 31, 2015		Dec. 31, 2014			Sept. 30, 2014
Interest income:
Loans	$	41,012	$	38,944		$	31,647	$	28,242		$	25,763
Investment securities	2,754		3,278			2,394		2,366			2,565
Other	224		218			205		172			150
	43,990		42,440			34,246		30,780			28,478
Interest expense:
Deposits	3,069		3,005			2,582		2,351			2,364
Federal Home Loan Bank advances	958		906			612		614			509
Federal funds purchased and securities sold under agreements to repurchase	—		3			5		15			6
Long-term debt	278		272			265		269			271
Other	51		24			48		29			20
	4,356		4,210			3,512		3,278			3,170
Net interest income	39,634		38,230			30,734		27,502			25,308
Provision for credit losses	700		500			3,000		500			—
Net interest income after provision for credit losses	38,934		37,730			27,734		27,002			25,308
Noninterest income:
Net gain on mortgage loan origination and sale activities	57,885		69,974			61,887		39,176			37,642
Mortgage servicing income	4,768		1,831			4,297		9,808			6,155
Income (loss) from WMS Series LLC	380		484			564		170			(122		)
Gain on debt extinguishment	—		—			—		—			2
Depositor and other retail banking fees	1,701		1,399			1,139		896			944
Insurance agency commissions	477		291			415		261			256
Gain on sale of investment securities available for sale	1,002		—			—		1,185			480
Bargain purchase gain (adjustment)	796		(79		)	6,628		—			—
Other	459		(913		)	443		(9		)	456
	67,468		72,987			75,373		51,487			45,813
Noninterest expense:
Salaries and related costs	60,991		61,654			57,593		44,706			42,604
General and administrative	14,869		14,502			13,161		11,240			10,326
Legal	868		577			467		500			630
Consulting	166		813			5,565		1,042			628
Federal Deposit Insurance Corporation assessments	504		861			525		442			682
Occupancy	6,077		6,107			5,840		4,556			4,935
Information services	8,159		7,714			6,120		6,455			4,220
Net cost (income) from operation and sale of other real estate owned	392		107			211		(150		)	133
	92,026		92,335			89,482		68,791			64,158
Income before income tax expense	14,376		18,382			13,625		9,698			6,963
Income tax expense	4,415		6,006			3,321		4,077			1,988
NET INCOME	$	9,961	$	12,376		$	10,304	$	5,621		$	4,975

Basic income per share	$	0.45	$	0.56		$	0.60	$	0.38		$	0.34
Diluted income per share	$	0.45	$	0.56		$	0.59	$	0.38		$	0.33
Basic weighted average number of shares outstanding	22,035,317		22,028,539			17,158,303		14,811,699			14,805,780
Diluted weighted average number of shares outstanding	22,291,810		22,292,734			17,355,076		14,973,222			14,968,238

HomeStreet, Inc. and Subsidiaries

Consolidated Statements of Financial Condition



(in thousands, except share data)	Sept. 30, 2015		Dec. 31, 2014		% Change

Assets:
Cash and cash equivalents (including interest-earning instruments of $11,363 and $10,271)	$	37,303	$	30,502	22	%
Investment securities (includes $570,082 and $427,326 carried at fair value)	602,018		455,332		32	%
Loans held for sale (includes $860,800 and $610,350 carried at fair value)	882,319		621,235		42	%
Loans held for investment (net of allowance for loan losses of $26,922 and $22,021; includes $23,755 and $0 carried at fair value)	3,012,943		2,099,129		44	%
Mortgage servicing rights (includes $132,701 and $112,439 carried at fair value)	146,080		123,324		18	%
Other real estate owned	8,273		9,448		(12	)%
Federal Home Loan Bank stock, at cost	44,652		33,915		32	%
Premises and equipment, net	60,544		45,251		34	%
Goodwill	11,945		11,945		—	%
Other assets	169,576		105,009		61	%
Total assets	$	4,975,653	$	3,535,090	41
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	3,307,693	$	2,445,430	35
Federal Home Loan Bank advances	1,025,745		597,590		72
Federal funds purchased and securities sold under agreements to repurchase	—		50,000		(100	)
Accounts payable and other liabilities	119,900		77,975		54
Long-term debt	61,857		61,857		—
Total liabilities	4,515,195		3,232,852		40
Commitments and contingencies
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares
Issued and outstanding, 0 shares and 0 shares	—		—		—
Common stock, no par value
Authorized 160,000,000 shares
Issued and outstanding, 22,061,702 shares and 14,856,611 shares	511		511		—
Additional paid-in capital	222,047		96,615		130
Retained earnings	236,207		203,566		16
Accumulated other comprehensive income	1,693		1,546		10
Total shareholders’ equity	460,458		302,238		52
Total liabilities and shareholders’ equity	$	4,975,653	$	3,535,090	41

HomeStreet, Inc. and Subsidiaries

Five Quarter Consolidated Statements of Financial Condition



(in thousands, except share data)	Sept. 30, 2015		Jun. 30, 2015			Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014

Assets:
Cash and cash equivalents	$	37,303	$	46,197		$	56,864	$	30,502	$	34,687
Investment securities	602,018		509,545			476,102		455,332		449,948
Loans held for sale	882,319		972,183			865,322		621,235		698,111
Loans held for investment, net	3,012,943		2,900,675			2,828,177		2,099,129		1,964,762
Mortgage servicing rights	146,080		153,237			121,722		123,324		124,593
Other real estate owned	8,273		11,428			11,589		9,448		10,478
Federal Home Loan Bank stock, at cost	44,652		40,742			34,996		33,915		34,271
Premises and equipment, net	60,544		58,111			49,808		45,251		44,476
Goodwill	11,945		11,945			11,945		11,945		11,945
Other assets	169,576		162,185			147,878		105,009		101,385
Total assets	$	4,975,653	$	4,866,248		$	4,604,403	$	3,535,090	$	3,474,656
Liabilities and shareholders’ equity:
Liabilities:
Deposits	$	3,307,693	$	3,322,653		$	3,344,223	$	2,445,430	$	2,425,458
Federal Home Loan Bank advances	1,025,745		922,832			669,419		597,590		598,590
Federal funds purchased and securities sold under agreements to repurchase	—		—			9,450		50,000		14,225
Accounts payable and other liabilities	119,900		111,180			80,059		77,975		79,958
Long-term debt	61,857		61,857			61,857		61,857		61,857
Total liabilities	4,515,195		4,418,522			4,165,008		3,232,852		3,180,088
Shareholders’ equity:
Preferred stock, no par value
Authorized 10,000 shares	—		—			—		—		—
Common stock, no par value
Authorized 160,000,000 shares	511		511			511		511		511
Additional paid-in capital	222,047		221,551			221,301		96,615		96,650
Retained earnings	236,207		226,246			213,870		203,566		197,945
Accumulated other comprehensive income (loss)	1,693		(582		)	3,713		1,546		(538		)
Total shareholders’ equity	460,458		447,726			439,395		302,238		294,568
Total liabilities and shareholders’ equity	$	4,975,653	$	4,866,248		$	4,604,403	$	3,535,090	$	3,474,656

HomeStreet, Inc. and Subsidiaries

Average Balances, Yields and Rates Paid (Taxable-equivalent basis)



	Quarter Ended September 30,
	2015						2014
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: ⁽¹⁾
Cash and cash equivalents	$	27,725	$	13	0.18	%	$	27,631	$	13	0.19	%
Investment securities	539,330		3,453		2.54	%	457,545		3,141		2.72	%
Loans held for sale	851,878		8,394		3.91	%	550,237		5,393		3.89	%
Loans held for investment	2,975,624		32,727		4.36	%	1,917,503		20,402		4.22	%
Total interest-earning assets	4,394,557		44,587		4.03	%	2,952,916		28,949		3.89	%
Noninterest-earning assets ⁽²⁾	423,048						329,089
Total assets	$	4,817,605					$	3,282,005
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	404,874	495		0.49	%	$	281,820	301		0.42	%
Savings accounts	299,135		258		0.34	%	174,849		238		0.54	%
Money market accounts	1,126,119		1,268		0.45	%	1,001,709		1,125		0.45	%
Certificate accounts	743,384		1,101		0.59	%	402,786		720		0.71	%
Total interest-bearing deposits	2,573,512		3,122		0.48	%	1,861,164		2,384		0.51	%
FHLB advances	887,711		958		0.43	%	442,409		509		0.46	%
Federal funds purchased and securities sold under agreements to repurchase	—		—		—	%	11,149		6		0.21	%
Long-term debt	61,857		278		1.78	%	61,857		271		1.74	%
Total interest-bearing liabilities	3,523,080		4,358		0.49	%	2,376,579		3,170		0.53	%
Noninterest-bearing liabilities	834,036						610,197
Total liabilities	4,357,116						2,986,776
Shareholders’ equity	460,489						295,229
Total liabilities and shareholders’ equity	$	4,817,605					$	3,282,005
Net interest income ⁽³⁾			$	40,229					$	25,779
Net interest spread					3.54	%					3.36	%
Impact of noninterest-bearing sources					0.13	%					0.14	%
Net interest margin					3.67	%					3.50	%


(1)	The average balances of nonaccrual assets and related income, if any, are included in their respective categories.


(2)	Includes loan balances that have been foreclosed and are now reclassified to other real estate owned.


(3)	Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $595 thousand and $471 thousand for the quarters ended September 30, 2015 and September 30, 2014, respectively. The estimated federal statutory tax rate was 35% for the periods presented.

HomeStreet, Inc. and Subsidiaries

Average Balances, Yields and Rates Paid (Taxable-equivalent basis)



	Nine Months Ended September 30,
	2015						2014
(in thousands)	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
Assets:
Interest-earning assets: ⁽¹⁾
Cash and cash equivalents	$	37,719	$	55	0.19	%	$	30,793	$	45	0.19	%
Investment securities	503,280		10,355		2.74	%	460,723		10,005		2.90	%
Loans held for sale	769,153		22,010		3.81	%	447,946		12,863		3.84	%
Loans held for investment	2,738,085		89,786		4.37	%	1,838,526		59,089		4.30	%
Total interest-earning assets	4,048,237		122,206		4.02	%	2,777,988		82,002		3.95	%
Noninterest-earning assets ⁽²⁾	389,691						345,229
Total assets	$	4,437,928					$	3,123,217
Liabilities and shareholders’ equity:
Deposits:
Interest-bearing demand accounts	$	283,523	1,004		0.46	%	$	268,282	657		0.33	%
Savings accounts	281,212		800		0.39	%	166,896		657		0.53	%
Money market accounts	1,113,001		3,643		0.44	%	969,262		3,224		0.44	%
Certificate accounts	792,285		3,313		0.56	%	476,224		2,574		0.72	%
Total interest-bearing deposits	2,470,021		8,760		0.47	%	1,880,664		7,112		0.51	%
FHLB advances	730,519		2,477		0.46	%	372,605		1,366		0.49	%
Federal funds purchased and securities sold under agreements to repurchase	15,204		28		0.16	%	4,134		7		0.23	%
Long-term debt	61,857		814		1.76	%	62,469		851		1.82	%
Total interest-bearing liabilities	3,277,601		12,079		0.49	%	2,319,872		9,336		0.54	%
Noninterest-bearing liabilities	731,256						519,199
Total liabilities	4,008,857						2,839,071
Shareholders’ equity	429,071						284,146
Total liabilities and shareholders’ equity	$	4,437,928					$	3,123,217
Net interest income ⁽³⁾			$	110,127					$	72,666
Net interest spread					3.53	%					3.41	%
Impact of noninterest-bearing sources					0.10	%					0.09	%
Net interest margin					3.63	%					3.50	%


(1)	The average balances of nonaccrual assets and related income, if any, are included in their respective categories.


(2)	Includes loan balances that have been foreclosed and are now reclassified to other real estate owned.


(3)	Includes taxable-equivalent adjustments primarily related to tax-exempt income on certain loans and securities of $1.5 million for each of the nine months ended September 30, 2015 and September 30, 2014. The estimated federal statutory tax rate was 35% for the periods presented.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Net interest income	$	31,509		$	30,645		$	25,107		$	22,187		$	20,163
Provision for credit losses	700			500			3,000			500			—
Noninterest income	6,885			3,624			10,081			5,434			3,660
Noninterest expense	28,111			29,280			35,666			21,155			18,930
Income (loss) before income taxes	9,583			4,489			(3,478		)	5,966			4,893
Income tax expense (benefit)	2,783			1,635			(3,464		)	2,621			1,359
Net income (loss)	$	6,800		$	2,854		$	(14	)	$	3,345		$	3,534

Net income, excluding merger-related expenses (net of tax) and bargain purchase gain⁽¹⁾	$	6,288		$	5,019		$	1,242		$	3,923		$	4,003
Efficiency ratio ⁽²⁾	73.22		%	85.44		%	101.36		%	76.59		%	79.46		%
Full-time equivalent employees (ending)	807			757			768			608			605

Net gain on mortgage loan origination and sale activities:
Multifamily	$	1,488		$	2,314		$	939		$	2,704		$	930
Other	422			141			204			(16		)	(101		)
	$	1,910		$	2,455		$	1,143		$	2,688		$	829

Production volumes for sale to the secondary market:
Multifamily mortgage originations	$	47,342		$	79,789		$	24,428		$	57,135		$	60,699
Multifamily mortgage loans sold	42,333			72,459			26,173			99,285			20,409

(1)

Commercial and Consumer Banking segment net income, excluding merger-related expenses, is a non-GAAP financial disclosure. The Company uses this non-GAAP financial measure to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. For corresponding reconciliations to GAAP financial measures, see Non-GAAP Financial Measures beginning on page 29 of this earnings release.


(2)	Noninterest expense divided by total net revenue (net interest income and noninterest income).

Commercial Mortgage Servicing Income



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Servicing income, net:
Servicing fees and other	$	1,181		$	1,135		$	886		$	970		$	1,289
Amortization of multifamily MSRs	(511		)	(476		)	(454		)	(429		)	(425		)
Commercial mortgage servicing income	$	670		$	659		$	432		$	541		$	864

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Commercial Loans Serviced for Others



(in thousands)	Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014

Commercial
Multifamily	$	866,880	$	840,051	$	773,092	$	752,640	$	703,197
Other	86,567		83,982		83,574		82,354		86,589
Total commercial loans serviced for others	$	953,447	$	924,033	$	856,666	$	834,994	$	789,786

Commercial Multifamily Capitalized Mortgage Servicing Rights



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Beginning balance	$	12,649		$	11,013		$	10,885		$	9,116		$	9,122
Originations	1,241			2,112			582			2,198			418
Amortization	(511		)	(476		)	(454		)	(429		)	(424		)
Ending balance	$	13,379		$	12,649		$	11,013		$	10,885		$	9,116
Ratio of MSR carrying value to related loans serviced for others	1.48		%	1.45		%	1.36		%	1.38		%	1.23		%
MSR servicing fee multiple ⁽¹⁾	3.34			3.29			3.16			3.20			2.87
Weighted-average note rate (loans serviced for others)	4.82		%	4.89		%	5.14		%	5.02		%	5.12		%
Weighted-average servicing fee (loans serviced for others)	0.44		%	0.44		%	0.43		%	0.43		%	0.43		%


(1)	Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Investment Securities



(in thousands, except for duration data)	Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014

Available for sale:
Mortgage-backed securities:
Residential	$	91,005	$	108,626	$	114,175	$	107,280	$	110,837
Commercial	24,064		13,352		13,667		13,671		13,571
Municipal bonds	187,083		137,250		122,434		122,334		123,041
Collateralized mortgage obligations:
Residential	100,228		80,612		58,476		43,166		54,887
Commercial	43,807		19,271		19,794		20,486		15,633
Corporate debt securities	82,882		82,698		79,769		79,400		72,114
U.S. Treasury	41,013		41,023		41,015		40,989		42,013
Total available for sale	$	570,082	$	482,832	$	449,330	$	427,326	$	432,096
Held to maturity	31,936		26,713		26,772		28,006		17,852
	$	602,018	$	509,545	$	476,102	$	455,332	$	449,948
Weighted average duration in years
Available for sale	3.9		3.9		4.4		4.6		5.0

Five Quarter Loans Held for Investment



(in thousands)	Sept. 30, 2015				Jun. 30, 2015				Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Consumer loans
Single family	$	1,171,967		⁽¹⁾	$	1,182,542		⁽¹⁾	$	1,198,605		$	896,665		$	788,232
Home equity and other	237,491				216,635				205,200			135,598			138,276
	1,409,458				1,399,177				1,403,805			1,032,263			926,508
Commercial loans
Commercial real estate	563,241				547,571				535,546			523,464			530,335
Multifamily	382,392				366,187				352,193			55,088			62,498
Construction/land development	529,871				454,817				402,393			367,934			297,790
Commercial business	158,135				166,216				164,259			147,449			173,226
	1,633,639				1,534,791				1,454,391			1,093,935			1,063,849
	3,043,097				2,933,968				2,858,196			2,126,198			1,990,357
Net deferred loan fees, costs and discounts	(3,232		)		(7,516		)		(5,103		)	(5,048		)	(3,748		)
	3,039,865				2,926,452				2,853,093			2,121,150			1,986,609
Allowance for loan losses	(26,922		)		(25,777		)		(24,916		)	(22,021		)	(21,847		)
	$	3,012,943			$	2,900,675			$	2,828,177		$	2,099,129		$	1,964,762


(1)	Includes $23.8 million and $38.2 million of single family loans that are carried at fair value at September 30, 2015 and June 30, 2015 respectively.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Credit Quality Activity

Allowance for Credit Losses (roll-forward)



	Quarter ended
(in thousands)	Sept. 30, 2015				Jun. 30, 2015				Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Beginning balance	$	26,448			$	25,628			$	22,524		$	22,111		$	22,168
Provision (reversal of provision) for credit losses	700				500				3,000			500			—
(Charge-offs), net of recoveries	739				320				104			(87		)	(57		)
Ending balance	$	27,887			$	26,448			$	25,628		$	22,524		$	22,111
Components:
Allowance for loan losses	$	26,922			$	25,777			$	24,916		$	22,021		$	21,847
Allowance for unfunded commitments	965				671				712			503			264
Allowance for credit losses	$	27,887			$	26,448			$	25,628		$	22,524		$	22,111

Allowance as a % of loans held for investment⁽¹⁾	0.89		%	⁽²⁾	0.88		%	⁽²⁾	0.87		%	1.04		%	1.10		%
Allowance as a % of nonaccrual loans	138.27		%		120.97		%		117.48		%	137.51		%	109.75		%


(1)	Includes loans acquired with bank acquisitions. Excluding acquired loans, allowance for loan losses /total loans was 1.14%, 1.16%, 1.19%, 1.10% and 1.18% at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.


(2)	In this calculation, loans held for investment includes loans that are carried at fair value.

Nonperforming Assets (NPAs) roll-forward



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014			Sept. 30, 2014

Beginning balance	$	32,736		$	32,798		$	25,462			$	30,384		$	32,280
Additions	2,118			5,919			10,793			⁽¹⁾	1,754			3,414
Reductions:
Recoveries (charge-offs)	739			320			104				(87		)	(57		)
OREO sales	(2,756		)	(623		)	(1,375		)		(2,220		)	(1,183		)
OREO writedowns and other adjustments	(399		)	—			(90		)		—			(93		)
Principal paydown, payoff advances and other adjustments	(2,587		)	(4,904		)	(864		)		(2,269		)	(948		)
Transferred back to accrual status	(2,108		)	(774		)	(1,232		)		(2,100		)	(3,029		)
Total reductions	(7,111		)	(5,981		)	(3,457		)		(6,676		)	(5,310		)
Net additions (reductions)	(4,993		)	(62		)	7,336				(4,922		)	(1,896		)
Ending balance⁽²⁾	$	27,743		$	32,736		$	32,798			$	25,462		$	30,384


(1)	Additions to NPAs included $7.4 million of acquired nonperforming assets during the quarter ended March 31, 2015.


(2)	Includes $1.5 million, $1.2 million, $1.4 million, $4.4 million and $6.3 million of nonperforming loans guaranteed by the SBA at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Nonperforming Assets by Loan Class



(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015				Dec. 31, 2014			Sept. 30, 2014

Loans accounted for on a nonaccrual basis:
Consumer
Single family	$	10,439		$	10,259		$	14,047			$	8,368		$	8,350
Home equity and other	1,608			1,533			1,306				1,526			1,700
	12,047			11,792			15,353				9,894			10,050
Commercial
Commercial real estate	2,540			3,850			3,070				4,843			7,058
Multifamily	1,449			1,671			1,005				—			—
Construction/land development	—			—			172				—			—
Commercial business	3,434			3,995			1,609				1,277			2,798
	7,423			9,516			5,856				6,120			9,856
Total loans on nonaccrual	$	19,470		$	21,308		$	21,209		⁽²⁾	$	16,014		$	19,906
Nonaccrual loans as a % of total loans	0.64		%	0.73		%	0.74		%		0.75		%	1.00		%

Other real estate owned:
Consumer
Single family	$	916		$	1,257		$	1,223			$	1,613		$	2,818

Commercial
Commercial real estate	4,113			4,332			4,527				1,996			1,822
Construction/land development	3,244			5,839			5,839				5,839			5,838
	7,357			10,171			10,366				7,835			7,660
Total other real estate owned	$	8,273		$	11,428		$	11,589			$	9,448		$	10,478

Nonperforming assets:
Consumer
Single family	$	11,355		$	11,516		$	15,270			$	9,981		$	11,168
Home equity and other	1,608			1,533			1,306				1,526			1,700
	12,963			13,049			16,576				11,507			12,868
Commercial
Commercial real estate	6,653			8,182			7,597				6,839			8,880
Multifamily	1,449			1,671			1,005				—			—
Construction/land development	3,244			5,839			6,011				5,839			5,838
Commercial business	3,434			3,995			1,609				1,277			2,798
	14,780			19,687			16,222				13,955			17,516
Total nonperforming assets⁽¹⁾	$	27,743		$	32,736		$	32,798			$	25,462		$	30,384
Nonperforming assets as a % of total assets	0.56		%	0.67		%	0.71		%		0.72		%	0.87		%


(1)	Includes $1.5 million, $1.2 million, $1.4 million, $4.4 million and $6.3 million of nonperforming loans guaranteed by the SBA at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.


(2)	Included in these balances are $7.4 million of acquired nonperforming loans at March 31, 2015.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Delinquencies by Loan Class



(in thousands)	30-59 days past due			60-89 days past due			90 days or more past due				Total past due				Current			Total loans

September 30, 2015
Total loans held for investment	$	10,356		$	7,921		$	54,622			$	72,899			$	2,970,198		$	3,043,097
Less: FHA/VA loans⁽¹⁾	3,861			3,313			35,152				42,326				54,161			96,487
Total loans, excluding FHA/VA loans	$	6,495		$	4,608		$	19,470			$	30,573			$	2,916,037		$	2,946,610

Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family	$	2,570		$	4,451		$	10,439			$	17,460			$	1,058,020		$	1,075,480
Home equity and other	1,294			157			1,608				3,059				234,432			237,491
	3,864			4,608			12,047				20,519				1,292,452			1,312,971
Commercial loans
Commercial real estate	1,714			—			2,540				4,254				558,987			563,241
Multifamily	—			—			1,449				1,449				380,943			382,392
Construction/land development	715			—			—				715				529,156			529,871
Commercial business	202			—			3,434				3,636				154,499			158,135
	2,631			—			7,423				10,054				1,623,585			1,633,639
	$	6,495		$	4,608		$	19,470		⁽²⁾	$	30,573		⁽²⁾	$	2,916,037		$	2,946,610
As a % of total loans, excluding FHA/VA loans	0.22		%	0.16		%	0.66		%		1.04		%		98.96		%	100.00		%

December 31, 2014
Total loans held for investment	$	8,814		$	3,797		$	51,001			$	63,612			$	2,062,586		$	2,126,198
Less: FHA/VA loans⁽¹⁾	4,121			2,200			34,737				41,058				50,778			91,836
Total loans, excluding FHA/VA loans	$	4,693		$	1,597		$	16,264			$	22,554			$	2,011,808		$	2,034,362

Loans by segment and class, excluding FHA/VA loans:
Consumer loans
Single family	$	3,711		$	252		$	8,368			$	12,331			$	792,498		$	804,829
Home equity and other	371			81			1,526				1,978				133,620			135,598
	4,082			333			9,894				14,309				926,118			940,427
Commercial loans
Commercial real estate	—			—			4,843				4,843				518,621			523,464
Multifamily	—			—			—				—				55,088			55,088
Construction/land development	—			1,261			—				1,261				366,673			367,934
Commercial business	611			3			1,527				2,141				145,308			147,449
	611			1,264			6,370				8,245				1,085,690			1,093,935
	$	4,693		$	1,597		$	16,264		⁽²⁾	$	22,554		⁽²⁾	$	2,011,808		$	2,034,362
As a % of total loans, excluding FHA/VA loans	0.23		%	0.08		%	0.80		%		1.11		%		98.89		%	100.00		%


(1)	Represents loans whose repayments are insured by the FHA or guaranteed by the VA.


(2)	Includes $1.5 million and $4.4 million of nonperforming loans guaranteed by the SBA at September 30, 2015 and December 31, 2014, respectively.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) by Accrual and Nonaccrual Status



(in thousands)	Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014
Accrual
Consumer loans
Single family⁽¹⁾	$	74,408	$	75,655	$	74,126	$	73,585	$	72,663
Home equity and other	1,395		1,937		2,102		2,430		2,501
	75,803		77,592		76,228		76,015		75,164
Commercial loans
Commercial real estate	4,431		19,287		19,516		21,703		23,964
Multifamily	3,019		3,041		3,059		3,077		3,101
Construction/land development	4,332		4,601		5,321		5,447		5,693
Commercial business	1,784		1,869		1,492		1,573		658
	13,566		28,798		29,388		31,800		33,416
	$	89,369	$	106,390	$	105,616	$	107,815	$	108,580
Nonaccrual
Consumer loans
Single family	$	2,158	$	1,419	$	1,443	$	2,482	$	1,379
Home equity and other	181		230		230		231		20
	2,339		1,649		1,673		2,713		1,399
Commercial loans
Commercial real estate	1,060		1,087		1,121		1,148		1,182
Commercial business	195		205		228		249		9
	1,255		1,292		1,349		1,397		1,191
	$	3,594	$	2,941	$	3,022	$	4,110	$	2,590
Total
Consumer loans
Single family⁽¹⁾	$	76,566	$	77,074	$	75,569	$	76,067	$	74,042
Home equity and other	1,576		2,167		2,332		2,661		2,521
	78,142		79,241		77,901		78,728		76,563
Commercial loans
Commercial real estate	5,491		20,374		20,637		22,851		25,146
Multifamily	3,019		3,041		3,059		3,077		3,101
Construction/land development	4,332		4,601		5,321		5,447		5,693
Commercial business	1,979		2,074		1,720		1,822		667
	14,821		30,090		30,737		33,197		34,607
	$	92,963	$	109,331	$	108,638	$	111,925	$	111,170


(1)	Includes loan balances insured by the FHA or guaranteed by the VA of $29.1 million, $28.4 million, $25.4 million, $26.8 million and $24.6 million at September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Troubled Debt Restructurings (TDRs) - Re-Defaults



	Quarter ended
(in thousands)	Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014

Recorded investment of re-defaults⁽¹⁾
Consumer loans
Single family	$	552	$	220	$	1,498	$	—	$	282
Home equity and other	68		—		—		—		—
	$	620	$	220	$	1,498	$	—	$	282


(1)	Represents TDRs that have defaulted in the current period within 12 months of their modification date. Defaulted TDRs are reported in the table above based on a payment default definition of 60 days past due for the consumer loans portfolio segment and 90 days past due for the commercial loans portfolio segment.

HomeStreet, Inc. and Subsidiaries

Commercial and Consumer Banking Segment (continued)

Five Quarter Deposits



(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Deposits by Product:
Noninterest-bearing accounts - checking and savings	$	372,070		$	387,899		$	305,738		$	240,679		$	271,669
Interest-bearing transaction and savings deposits:
NOW accounts	452,482			453,366			435,178			272,390			300,832
Statement savings accounts due on demand	296,983			300,214			307,731			200,638			184,656
Money market accounts due on demand	1,140,660			1,134,687			1,163,656			1,007,213			1,015,266
Total interest-bearing transaction and savings deposits	1,890,125			1,888,267			1,906,565			1,480,241			1,500,754
Total transaction and savings deposits	2,262,195			2,276,166			2,212,303			1,720,920			1,772,423
Certificates of deposit	719,208			753,327			751,333			494,526			367,124
Noninterest-bearing accounts - other	326,290			293,160			380,587			229,984			285,911
Total deposits	$	3,307,693		$	3,322,653		$	3,344,223		$	2,445,430		$	2,425,458


Percent of total deposits:
Noninterest-bearing accounts - checking and savings	11.2		%	11.7		%	9.1		%	9.8		%	11.2		%
Interest-bearing transaction and savings deposits:
NOW accounts	13.7			13.6			13.0			11.1			12.4
Statement savings accounts due on demand	9.0			9.0			9.2			8.2			7.6
Money market accounts due on demand	34.5			34.2			34.8			41.2			41.9
Total interest-bearing transaction and savings deposits	57.2			56.8			57.0			60.5			61.9
Total transaction and savings deposits	68.4			68.5			66.1			70.3			73.1
Certificates of deposit	21.7			22.7			22.5			20.2			15.1
Noninterest-bearing accounts - other	9.9			8.8			11.4			9.5			11.8
Total deposits	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Net interest income	$	8,125		$	7,585		$	5,627		$	5,315		$	5,145
Noninterest income	60,584			69,363			65,292			46,053			42,153
Noninterest expense	63,916			63,055			53,816			47,636			45,228
Income before income taxes	4,793			13,893			17,103			3,732			2,070
Income tax expense	1,632			4,371			6,785			1,456			629
Net income	$	3,161		$	9,522		$	10,318		$	2,276		$	1,441

Efficiency ratio ⁽¹⁾	93.02		%	81.94		%	75.88		%	92.73		%	95.62		%
Full-time equivalent employees (ending)	1,293			1,207			1,061			1003			993

Production volumes for sale to the secondary market:
Single family mortgage closed loan volume⁽²⁾⁽³⁾	$	1,934,151		$	2,022,656		$	1,606,893		$	1,330,735		$	1,294,895
Single family mortgage interest rate lock commitments⁽²⁾	$	1,806,767		$	1,882,955		$	1,901,238		$	1,171,598		$	1,167,677
Single family mortgage loans sold⁽²⁾	$	1,965,223		$	1,894,387		$	1,316,959		$	1,273,679		$	1,179,464


(1)	Noninterest expense divided by total net revenue (net interest income and noninterest income).


(2)	Includes loans originated by WMS Series LLC and purchased by HomeStreet.


(3)	Represents single family mortgage production volume designated for sale to the secondary market during each respective period.

Mortgage Banking Net Gain on Sale to the Secondary Market



	Quarter ended
(in thousands)	Sept. 30, 2015		Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014		Sept. 30, 2014

Net gain on mortgage loan origination and sale activities:⁽¹⁾
Single family:
Servicing value and secondary market gains⁽²⁾	$	49,613	$	61,884		$	56,289		$	29,405	$	29,866
Loan origination and funding fees	6,362		5,635			4,455			7,083		6,947
Total mortgage banking net gain on mortgage loan origination and sale activities⁽¹⁾	$	55,975	$	67,519		$	60,744		$	36,488	$	36,813

Composite Margin (in basis points):
Servicing value and secondary market gains / interest rate lock commitments⁽³⁾	275		316			306			251		256
Loan origination and funding fees / retail mortgage originations⁽⁴⁾	36		31			30			59		60
Composite Margin	311		347		⁽⁵⁾	336		⁽⁵⁾	310		316


(1)	Excludes inter-segment activities.


(2)	Comprised of gains and losses on interest rate lock commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and the estimated fair value of the repurchase or indemnity obligation recognized on new loan sales.


(3)	Servicing value and secondary marketing gains have been aggregated and are stated as a percentage of interest rate lock commitments.


(4)	Loan origination and funding fees is stated as a percentage of mortgage originations from the retail channel and excludes mortgage loans purchased from WMS Series LLC. In the first quarter of 2015, the Company implemented a new pricing structure where origination fees are no longer charged at funding and instead included in the rate/price of the loan.


(5)	In the second quarter, we recognized an additional $2.4 million of gain on mortgage loan origination and sale revenue related to the correction of an error in the mortgage loan pipeline valuation. The Composite Margin in the table above has been adjusted to eliminate the impact of this correction.

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Mortgage Banking Servicing Income



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Servicing income, net:
Servicing fees and other	$	9,955		$	8,922		$	8,177		$	7,537		$	8,061
Changes in fair value of single family MSRs due to modeled amortization ⁽¹⁾	(8,478		)	(9,012		)	(9,235		)	(6,823		)	(6,212		)
	1,477			(90		)	(1,058		)	714			1,849
Risk management, single family MSRs:
Changes in fair value of MSR due to changes in model inputs and/or assumptions ⁽²⁾	(19,396		)	18,483			(7,311		)	(7,793		)	899
Net gain (loss) from derivatives economically hedging MSR	22,017			(17,221		)	12,234			16,346			2,543
	2,621			1,262			4,923			8,553			3,442
Mortgage Banking servicing income	$	4,098		$	1,172		$	3,865		$	9,267		$	5,291


(1)	Represents changes due to collection/realization of expected cash flows and curtailments.


(2)	Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.

Single Family Loans Serviced for Others



(in thousands)	Sept. 30, 2015		Jun. 30, 2015		Mar. 31, 2015		Dec. 31, 2014		Sept. 30, 2014

Single family
U.S. government and agency	$	13,590,706	$	12,361,841	$	11,275,491	$	10,630,864	$	10,007,872
Other	680,481		618,204		634,763		585,344		585,393
Total single family loans serviced for others	$	14,271,187	$	12,980,045	$	11,910,254	$	11,216,208	$	10,593,265

HomeStreet, Inc. and Subsidiaries

Mortgage Banking Segment (continued)

Single Family Capitalized Mortgage Servicing Rights



	Quarter ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014

Beginning balance	$	140,588		$	110,709		$	112,439		$	115,477		$	108,869
Additions and amortization:
Originations	19,984			20,405			14,813			11,567			11,944
Purchases	3			3			3			11			3
Changes due to modeled amortization ⁽¹⁾	(8,478		)	(9,012		)	(9,235		)	(6,823		)	(6,212		)
Net additions and amortization	11,509			11,396			5,581			4,755			5,735
Changes in fair value due to changes in model inputs and/or assumptions ⁽²⁾	(19,396		)	18,483			(7,311		)	(7,793		)	873
Ending balance	$	132,701		$	140,588		$	110,709		$	112,439		$	115,477
Ratio of MSR carrying value to related loans serviced for others	0.93		%	1.08		%	0.93		%	1.00		%	1.09		%
MSR servicing fee multiple ⁽³⁾	3.21			3.72			3.17			3.42			3.68
Weighted-average note rate (loans serviced for others)	4.09		%	4.10		%	4.14		%	4.18		%	4.19		%
Weighted-average servicing fee (loans serviced for others)	0.29		%	0.29		%	0.29		%	0.29		%	0.30		%


(1)	Represents changes due to collection/realization of expected cash flows and curtailments.


(2)	Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.


(3)	Represents the ratio of MSR carrying value to related loans serviced for others divided by the weighted-average servicing fee for loans serviced for others.

HomeStreet, Inc. and Subsidiaries

Non-GAAP Financial Measures

Tangible common shareholders' equity is calculated by deducting goodwill and intangible assets (excluding mortgage servicing rights) from shareholders' equity. Tangible common shareholders' equity is considered a non-GAAP financial measure and should be viewed in conjunction with shareholders' equity. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.

Tangible book value is calculated by dividing tangible common shareholders' equity by the number of common shares outstanding. The return on average tangible common shareholders' equity is calculated by dividing net earnings available to common shareholders (annualized) by average tangible common shareholders' equity.

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures:



	Quarter Ended															Nine Months Ended
(dollars in thousands, except share data)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Sept. 30, 2015			Sept. 30, 2014

Shareholders' equity	$	460,458		$	447,726		$	439,395		$	302,238		$	294,568		$	460,458		$	294,568
Less: Goodwill and other intangibles	(20,250		)	(20,778		)	(21,324		)	(14,211		)	(14,444		)	(20,250		)	(14,444		)
Tangible shareholders' equity	$	440,208		$	426,948		$	418,071		$	288,027		$	280,124		$	440,208		$	280,124

Book value per share	$	20.87		$	20.29		$	19.94		$	20.34		$	19.83		$	20.87		$	19.83
Impact of goodwill and other intangibles	(0.92		)	(0.94		)	(0.97		)	(0.95		)	(0.97		)	(0.92		)	(0.97		)
Tangible book value per share	$	19.95		$	19.35		$	18.97		$	19.39		$	18.86		$	19.95		$	18.86

Average shareholders' equity	$	460,489		$	455,721		$	370,008		$	305,068		$	295,229		$	429,071		$	284,146
Less: Average goodwill and other intangibles	(20,596		)	(21,135		)	(16,698		)	(14,363		)	(14,604		)	(19,491		)	(14,291		)
Average tangible shareholders' equity	$	439,893		$	434,586		$	353,310		$	290,705		$	280,625		$	409,580		$	269,855

Return on average shareholders’ equity	8.65		%	10.86		%	11.14		%	7.37		%	6.74		%	10.14		%	7.81		%
Impact of goodwill and other intangibles	0.41		%	0.53		%	0.53		%	0.36		%	0.35		%	0.49		%	0.41		%
Return on average tangible shareholders' equity	9.06		%	11.39		%	11.67		%	7.73		%	7.09		%	10.63		%	8.22		%

Return on average shareholders' equity	8.65		%	10.86		%	11.14		%	7.37		%	6.74		%	10.14		%	7.81		%
Impact of merger-related expenses (net of tax) and bargain purchase gain	(0.44		)%	1.90		%	1.36		%	0.76		%	0.64		%	0.91		%	0.66		%
Return on average shareholders' equity, excluding merger-related expenses (net of tax) and bargain purchase gain	8.21		%	12.76		%	12.50		%	8.13		%	7.38		%	11.05		%	8.47		%

Return on average assets	0.83		%	1.06		%	1.08		%	0.65		%	0.61		%	0.98		%	0.71		%
Impact of merger-related expenses (net of tax) and bargain purchase gain	(0.05		)%	0.19		%	0.13		%	0.07		%	0.05		%	0.09		%	0.06		%
Return on average assets, excluding merger-related expenses (net of tax) and bargain purchase gain	0.78		%	1.25		%	1.21		%	0.72		%	0.66		%	1.07		%	0.77		%

The press release contains certain non-GAAP financial disclosures for consolidated net income, excluding merger-related expenses, diluted earnings per share, excluding acquisition-related expenses, and Commercial and Consumer Banking segment net income, excluding acquisition-related expenses. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.



	Quarter Ended															Nine Months Ended
(in thousands)	Sept. 30, 2015			Jun. 30, 2015			Mar. 31, 2015			Dec. 31, 2014			Sept. 30, 2014			Sept. 30, 2015			Sept. 30, 2014

Net income	$	9,961		$	12,376		$	10,304		$	5,621		$	4,975		$	32,641		$	16,638
Impact of merger-related expenses (net of tax) and bargain purchase gain	(512		)	2,165			1,256			578			469			2,909			1,408
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain	$	9,449		$	14,541		$	11,560		$	6,199		$	5,444		$	35,550		$	18,046

Noninterest expense	$	92,026		$	92,335		$	89,482		$	68,791		$	64,158		$	273,843		$	183,220
Deduct: merger-related expenses	(437		)	(3,208		)	(12,165		)	(889		)	(722		)	(15,810		)	(2,166		)
Noninterest expense, excluding merger-related expenses	$	91,589		$	89,127		$	77,317		$	67,902		$	63,436		$	258,033		$	181,054

Diluted earnings per common share	$	0.45		$	0.56		$	0.59		$	0.38		$	0.33		$	1.58		$	1.11
Impact of merger-related expenses (net of tax) and bargain purchase gain	(0.03		)	0.09			0.08			0.03			0.03			0.14			0.10
Diluted earnings per common share, excluding merger-related expenses (net of tax) and bargain purchase gain	$	0.42		$	0.65		$	0.67		$	0.41		$	0.36		$	1.72		$	1.21

Commercial and Consumer Banking Segment:
Net income (loss)	$	6,800		$	2,854		$	(14	)	$	3,345		$	3,534		$	9,640		$	11,403
Impact of merger-related expenses (net of tax) and bargain purchase gain	(512		)	2,165			1,256			578			469			2,909			1,408
Net income, excluding merger-related expenses (net of tax) and bargain purchase gain	$	6,288		$	5,019		$	1,242		$	3,923		$	4,003		$	12,549		$	12,811

HomeStreet, Inc. - FORM 8-K - EX-99.1 - EARNINGS RELEASE ISSUED BY HOMESTREET, INC. DATED OCTOBER 26, 2015 - October 26, 2015

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